office of management and budget...presentation, and analysis of data relating to establishments, and...

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Thursday

April 20 2000

Part II

Office of Management and Budget North American Industry Classification SystemmdashUpdate for 2002 Notice


21242 Federal Register Vol 65 No 77 Thursday April 20 2000 Notices

OFFICE OF MANAGEMENT AND BUDGET

North American Industry Classification SystemmdashUpdate for 2002

AGENCY Office of Management and Budget Executive Office of the President ACTION Notice of solicitation of comments on the Economic Classification Policy Committeersquos recommendations for the 2002 revision of the North American Industry Classification System

SUMMARY Under Title 44 USC 3504(e) the Office of Management and Budget (OMB) seeks public comment on the advisability of adopting the proposed North American Industry Classification System (NAICS) updates for 2002 OMBrsquos Economic Classification Policy Committee (ECPC) recommends an update of the industry classification system to extend the harmonized three-country classification structure to construction and to recognize important changes in the retail trade and information sectors In addition as an interim measure in the United States the ECPC recommends restructuring of the Wholesale Trade sector to reflect differences in production functions and to capture more accurately the rapidly-growing business-to-business electronic markets developing in the United States

This notice (1) Summarizes the background for the proposed revisions to NAICS 1997 in Part I (2) contains a summary of public comments in Part II (3) details the proposed structure changes agreed upon by the three countries in Part III and (4) provides a comprehensive listing of proposed changes for national industries and their link to NAICS 1997 industries in Part IV

OMB published a notification of intention to complete portions of NAICS in a February 25 1999 Federal Register notice (64 FR 9416ndash9419) That notice solicited comments on the advisability of revising the NAICS 1997 structure for 2002 and solicited comments on the creation of new industries in the Construction and Wholesale Trade Sectors modifications to the national industries for department stores and nonstore retailers and other changes identified as necessary during the initial implementation of NAICS 1997 The deadline for submitting comments was April 26 1999

After considering all proposals from the public consulting with a large number of US data users and industry groups and undertaking extensive discussions with Statistics Canada and

Mexicorsquos Instituto Nacional deacute acute acute Estadıstica Geografıa e Informatica (INEGI) the ECPC INEGI and Statistics Canada developed a revised structure for both the Construction and Information sectors of NAICS that would apply to all three North American countries

For Wholesale Trade after extensive discussions with Statistics Canada and INEGI the representatives of the three countriesrsquo statistical agencies decided to delay three-country changes to this sector and instead plan for a complete restructuring of the distribution network industries (wholesale retail transportation and warehousing) in 2007 In the interim the ECPC recommends restructuring the Wholesale Trade sector to reflect differences in production functions between those wholesalers that take title to goods and those that do not and to capture more accurately the rapidly-growing business-to-business electronic markets developing in the United States The ECPC also developed proposed additional US industry detail in the Retail Trade sector for NAICS United States The ECPC recommends that NAICS United States 2002 incorporate these changes as shown in Parts III and IV

Following an extensive process of development and discussions by the ECPC with maximum possible public input OMB seeks comment on the advisability of revising NAICS to incorporate the changes published in this notice The modified NAICS would be employed in relevant data collections by all US statistical agencies beginning with the reference year 2002 Statistics Canada and INEGI are recommending acceptance of the proposed revision of the NAICS system for industry classification in the statistical programs of their national systems and are seeking comments in their respective countries Representatives of the three countries will hold further discussions to consider public comments that they receive DATES To ensure consideration of comments on the adoption and implementation of the NAICS revisions detailed in this notice comments must be in writing You should submit them as soon as possible but no later than June 19 2000 This proposed revision to NAICS would become effective in the US on January 1 2002 ADDRESSES You should send correspondence about the adoption and implementation of NAICS revisions as shown in this Federal Register notice to Katherine K Wallman Chief Statistician Office of Management and Budget 10201 New Executive Office

Building Washington DC 20503 telephone number (202) 395ndash3093 FAX number (202) 395ndash7245

You should address inquiries about the content of industries or requests for electronic copies of the tables to Carole Ambler Chair Economic Classification Policy Committee Bureau of the Census Room 2633ndash3 Washington DC 20233 telephone number (301) 457ndash 2668 FAX number (301) 457ndash1343

Electronic Availability and Comments This document is available on the Internet from the Census Bureau via WWW browser and E-mail To obtain this document via WWW browser connect to http wwwcensusgovnaics This WWW page also contains previous NAICS Federal Register notices and related documents

You may send comments via E-mail to pbuggombeopgov with subject NAICS02 OMB will include in the official record comments received via E-mail at this address with this subject by the date specified above FOR FURTHER INFORMATION CONTACT Paul Bugg 10201 New Executive Office Building Washington DC 20503 E-mail address pbuggombeopgov telephone number (202) 395ndash3093 FAX number (202) 395ndash7245 SUPPLEMENTARY INFORMATION

Part I Background of NAICS 1997

NAICS is a system for classifying establishments by type of economic activity Its purposes are (1) To facilitate the collection tabulation presentation and analysis of data relating to establishments and (2) to promote uniformity and comparability in the presentation and analysis of statistical data describing the economy Federal statistical agencies use NAICS to collect or publish data by industry It also is used widely by State agencies trade associations private businesses and other organizations

INEGI of Mexico Statistics Canada and the United States Office of Management and Budget (OMB) through its Economic Classification Policy Committee (ECPC) collaborated on NAICS to make the industrial statistics produced in the three countries comparable NAICS is the first industry classification system developed in accordance with a single principle of aggregation the principle that producing units that use similar production processes should be grouped together in the classification NAICS also reflects in a much more explicit way the enormous changes in technology and in the growth and diversification of services that have



marked recent decades Industry statistics presented using NAICS are also comparable with statistics compiled according to the latest revision of the United Nationsrsquo International Standard Industrial Classification (ISIC Revision 3) for some sixty high-level groupings

For the three countries NAICS provides a consistent framework for the collection tabulation presentation and analysis of industrial statistics used by government policy analysts by academics and researchers by the business community and by the public However because of different national economic and institutional structures as well as limited resources and time for constructing the 1997 NAICS the NAICS structure was not made entirely comparable at the individual industry level across all three countries at that time The completion effort represented in this notice originally focused on the construction and wholesale trade sectors In the 1997 NAICS these two sectors were comparable at the two-digit level for all three North American countries

Throughout its development NAICS has been guided by four principles

(1) NAICS is erected on a production-oriented or supply-based conceptual framework This means that producing units that use the same or similar production processes are grouped together in NAICS

(2) NAICS gives special attention to developing production-oriented classifications for (a) new and emerging industries (b) service industries in general and (c) industries engaged in the production of advanced technologies

(3) Time series continuity is maintained to the extent possible given the need to reflect changes in the economy and proposals from data users Adjustments will be required for sectors where the United States Canada and Mexico have incompatible industry classification definitions in order to produce a common industry system for all three North American countries

(4) The system strives for compatibility with the two-digit level of the International Standard Industrial Classification of All Economic Activities (ISIC Rev 3) of the United Nations

The ECPC is committed to maintaining the principles of NAICS For example the proposed split in the national industry for department stores will separately identify two distinct and economically significant types of operations in the United States in accordance with principle 1 The ECPC is recommending the revisions for nonstore retailers and new Internet

information businesses based on NAICS principle 2 The rapid growth of Internet companies and the lack of a structural method for identifying these emerging industries justify the additional NAICS and US national detail The current round of completion activities is limited in scope based on NAICS principle 3 regarding time series continuity The ECPC believes that the narrow focus of the completion activities and the importance of Construction and Information to the economies of all three countries justify the resulting time series breaks Users are encouraged to implement the most current structure of NAICS as it becomes available

Part II Summary of Public Comments In response to the February 25 1999

Federal Register notice the ECPC received 28 comments regarding specific industries and recommended changes to the structure of NAICS 1997 Twenty-two of the comments focused on the Construction Sector three focused on the Wholesale Trade Sector and three were outside the scope of revision as defined by the ECPC

Public proposals for individual industries from all three countries were considered for acceptance if the proposed industry was based on the production-oriented concept of the system When a proposal was not accepted it was usually because (a) The resulting industry would have been too small in the US (b) data indicated that the specialization ratio was low (the specialization ratio indicates the extent to which the establishments in a given industry concentrate on the activities that define the industry) or (c) the proposal did not meet the production-oriented criterion for forming an industry in NAICS

The ECPC received a number of comments that suggested changes to NAICS that were not accepted All of these suggestions were carefully considered Some suggestions were modified at the request of the ECPC to better meet the objectives of NAICS Other suggestions proposed products (rather than industries) these will be considered in the future development of a product system Still other suggestions for change could not be justified on a production basis or could not be implemented in statistical programs for various reasons and thus were not accepted The ECPC is preparing individual responses to these suggestions carefully explaining why they were not accepted

Many of the twenty-two comments that related to the Construction sector requested changes or structures that were contradictory For this reason

alone the ECPC was not able to implement all of the requested changes Other comments requested detail that was not supported by specialization studies performed using 1997 Census of Construction data A final constraint on the acceptability of proposals was the necessity for three-country comparability A comment that was justified on a production function basis in the United States was not always supportable by either Canada or Mexico

The proposed structure of the Construction Sector has limited three-country comparability In most areas the representatives of the three countries attained comparability at the five-digit level The Specialty Trade Contractors subsector is comparable at the four-digit level This was the result of a desire to allow US agencies to develop separate residential and nonresidential data for Specialty Trade Contractors without creating special aggregations outside of the NAICS structure Although separate residential and nonresidential specialty trade industries were not created because of production function considerations the structure does allow for residential and nonresidential data collection by US statistical agencies The sixth digit of the structure is reserved for this purpose This information can be derived from Census Bureau data in Economic Census years The Bureau of Labor Statistics will provide this information in the Covered Employment and Wages Program when the NAICS 2002 changes are implemented

A second major proposal in the Construction sector related to project delivery methods In recent years Federal and State procurement laws have been changed to allow design-build as an alternative to the traditional design-bid-build process for construction projects in the public arena This project delivery method alternative to structuring the Construction sector was not accepted in the three-country negotiations for a variety of reasons First the design-build terminology is used differently by various practitioners The variation in use and meaning will cause difficulties in classification and the development of homogeneous industry groupings without extremely detailed questionnaires Such a level of detail is not practical Next while of growing importance in the United States and Canada design-build is not so prominent in Mexico Finally a project delivery method structure would have greatly expanded the number of industries at the lowest level of the classification The proposed structure has 31 detailed industries for the United



States A further split by project delivery method would further expand the number of detailed industries and reduce the size of each

The majority of the comments received that related to Wholesale Trade requested a change in the previously agreed upon scope of the sector After extensive discussions with Canada and Mexico the representatives decided to recommend that the basic delineation between Wholesale Trade and Retail Trade should remain unchanged Further the representatives agreed to undertake a complete restructuring of the distribution network industries (wholesale retail transportation and warehousing) in NAICS 2007 In the interim the United States has restructured NAICS United States 1997 Sector 42 Wholesale Trade to more closely align with the existing treatment in Canada and Mexico For the United States the ECPC has created three new subsectors 423 Merchant Wholesalers Durable Goods 424 Merchant Wholesalers Nondurable Goods and 425 Wholesale Electronic Markets and Agents and Brokers These subsectors more clearly separate types of wholesale trade businesses and will lead to more homogeneous statistical data The merchant wholesaler subsectors are characterized by establishments that take title to goods and play the role of principal in the buying and selling of goods The Wholesale Electronic Markets and Agents and Brokers subsector is characterized by establishments that act on behalf of sellers or facilitate wholesale transactions but do not actually take title to the goods

Wholesale trade is rapidly changing Many traditional wholesale trade functions are being outsourced to storage finance logistics or transportation specialists In addition to these changes the Internet has greatly expanded markets and supplier customer bases In order to identify these changes to the extent possible the ECPC recommends that subsector 425 Wholesale Electronic Markets and Agents and Brokers be split into two separate industries The first would include the wholesale trade electronic markets while the second would include agents and brokers The electronic markets provide guidance and assistance to both buyers and sellers They also provide a unified one stop purchasing environment with common requirements across a large number of suppliers The rapid growth of the business to business (B2B) electronic markets reflects the considerable efficiencies that can be obtained through the use of advanced

technology Separate identification of this rapidly growing activity will allow a more thorough and reflective analysis of wholesale trade in relation to the overall changes in distributive trades in 2007

In addition to working on the sectors described in the February 25 1999 Federal Register notice that were explicitly targeted for completion the rapid growth of the Internet and electronic commerce resulted in a decision by the three countries to reshyevaluate the Information sector as well Although new in 1997 the Information sector lacked finite categories related to new Internet activities such as Internet service providers web search portals and Internet publishing and broadcasting The second NAICS principle specifically targets new and emerging industries The North American partners in NAICS agreed that the importance of statistical data related to new Internet businesses outweighed the time series continuity criterion also used in NAICS development A full description of the recommended provisional changes to the Information sector is included in Part III

In addition to the changes listed above the ECPC is proposing several minor changes to titles of NAICS industries that have no impact on the content of those industries The ECPC recommends the following title changes NAICS 32611 Unsupported Plastics Film Sheet and Bag Manufacturing will be changed to Plastics Packaging Materials and Unlaminated Film and Sheet Manufacturing

NAICS 326111 Unsupported Plastics Bag Manufacturing will be changed to Plastics Bag Manufacturing

NAICS 326112 Unsupported Plastics Packaging Film and Sheet Manufacturing will be changed to Plastics Packaging Film and Sheet (including Laminated) Manufacturing

NAICS 326113 Unsupported Plastics Film and Sheet (except Packaging) Manufacturing will be changed to Unlaminated Plastics Film and Sheet (except Packaging) Manufacturing

NAICS 32612 Plastics Pipe Pipe Fitting and Unsupported Profile Shape Manufacturing will be changed to Plastics Pipe Pipe Fitting and Unlaminated Profile Shape Manufacturing

NAICS 326121 Unsupported Plastics Profile Shape Manufacturing will be changed to Unlaminated Plastics Profile Shape Manufacturing

NAICS 326130 Laminated Plastics Plate Sheet and Shape Manufacturing will be changed to Laminated Plastics Plate Sheet (except Packaging) and Shape Manufacturing

NAICS 444220 Nursery and Garden Centers will be changed to Nursery Garden Center and Farm Supply Stores to describe more completely the content of the industry

NAICS 452910 Warehouse Clubs and Superstores will be changed to Warehouse Clubs and Supercenters The term supercenter more adequately describes the content of the NAICS industry

NAICS 561330 Employee Leasing Services will be changed to Professional Employer Organizations to more closely reflect common industry terminology

The United States is also taking this opportunity to create additional national level detail for department stores and nonstore retailers These changes will create more meaningful homogeneous industries for the United States Department Stores NAICS 45211 will be split into two new 6-digit industries Department Stores (except Discount) NAICS 452111 and Discount Department Stores NAICS 452112

Electronic Shopping and Mail-Order Houses NAICS 45411 will be split into three new 6-digit industries Electronic Shopping NAICS 454111 Electronic Auctions NAICS 454112 and Mail-Order Houses NAICS 454113 The proposed changes for electronic shopping acknowledge the rapid growth of these activities in the United States The proposed industry for Electronic Shopping includes separate establishments engaged in primarily providing electronic shopping services The structure and codes for these new industries are detailed in Part IV of this notice

Time Series Continuity

The standard approach to preserving time series continuity after classification revisions is to create linkages where the series break This is accomplished by producing the data series using both the old and new classifications for a given period of transition With the dual classifications of data analysts can assess the full impact of the revision Data producers then may measure the reallocation of the data at aggregate industry levels and develop a concordance between the old and new series for that given point in time The concordance creates a crosswalk between the old and new classification systems Statistical agencies in the US are planning links between the 1997 NAICS and 2002 NAICS (with US national detail)



ECPC Recommendations for the Hierarchical Structure Industries and Coding System for the 2002 NAICS Revisions

Parts III and IV below present the ECPCrsquos final recommendations for how United States statistical agencies would revise the affected sectors and industries in the 2002 NAICS classification system for the United States The tables show the proposed 2002 hierarchy including NAICS and US national detail industries and the proposed coding system in 2002 NAICS sequence for the affected sectors and industries Parts III and IV include all ECPC recommended changes to the structure based on public

comment and discussions with INEGI and Statistics Canada

John T Spotila Administrator Office of Information and Regulatory Affairs

Part IIImdashProposed Revisions to the NAICS Structure

Section AmdashNAICS Structuremdash Construction

North American Industry Classification System (NAICS 2002) Agreement Number 32

This document represents the proposed agreement on the structure of the North American Industry Classification System (NAICS) for the construction sector The detailed NAICS structure along with a brief description

of the structure is attached (Attachments 1 and 2) Each country agrees to release a copy of the proposed NAICS structure to interested data users Comments received will be shared among the countries and additional discussions will be held before a final decision on the structure is made Each country may add additional detailed industries below the internationally agreed upon level of NAICS as necessary to meet national needs so long as this additional detail aggregates to an internationally agreed upon level in order to ensure full comparability among the three countries This NAICS structure was presented and accepted at the NAICS Committee meeting held on November 30 through December 2 1999 in Ottawa Canada

Accepted Signature Date

Canada Mexico United States

Richard Barnabe 1221999 Enrique Ordaz 1221999 Carole Ambler 1221999

ATTACHMENT 1mdashNAICS S TRUCTURE

23 Construction 236 Construction of Buildings 2361 Residential Building Construction 23611 Residential Building Construction 2362 Nonresidential Building Construction 23621 Industrial Building Construction 23622 Commercial and Institutional Building Construction 237 Heavy and Civil Engineering Construction 2371 Utility System Construction 23711 Water and Sewer Line and Related Structures Construction 23712 Oil and Gas Pipeline and Related Structures Construction 23713 Power and Communication Line and Related Structures Construction 2372 Land Subdivision 23721 Land Subdivision 2373 Highway Street and Bridge Construction 23731 Highway Street and Bridge Construction 2379 Other Heavy and Civil Engineering Construction 23799 Other Heavy and Civil Engineering Construction 238 Specialty Trade Contractors 2381 Foundation Structure and Building Exterior Contractors 2382 Building Equipment Contractors 23821 Electrical Contractors 23822 Plumbing Heating and Air-Conditioning Contractors 23829 Other Building Equipment Contractors 2383 Building Finishing Contractors 2389 Other Specialty Trade Contractors

Attachment 2mdashDescription of Construction Sector

Draft Classification for Construction

Representatives of the statistical agencies of Canada Mexico and the United States agree to a draft industrial classification for the Construction sector The draft classification of the construction sector is divided into subsectors covering Construction of Buildings Heavy and Civil Engineering Construction and Specialty Trade

Contractors These subsectors are further subdivided into 10 four-digit industry groups and 12 five-digit industries

A General Outline

Establishments in the Construction Sector erect buildings perform heavy and civil engineering construction and perform specialized construction trade activities The classification distinguishes between establishments that are responsible for an entire

building or building renovation project and those that perform specific functions during the erection of a building or building renovation project A subsector is provided for each group The classification further distinguishes all establishments performing civil engineering and heavy construction activities whether the complete project or a portion of the project in a third subsector

In Construction of Buildings the classification distinguishes between the



erection of residential buildings and the erection of nonresidential buildings Each of these industry groups includes establishments that are responsible for an entire building or building renovation project These industry groups include general contractors and design-builders working for owners and operative builders who undertake the entire project on a speculative basis Establishments in the Construction of Buildings subsector may perform specific construction activities or subcontract for specific tasks Additionally each industry group includes establishments that are hired to manage the project including oversight of the design financing bidding and review processes andor act as a liaison between the owner and a general contractor designer architect or engineer

The classification makes no distinctions in the residential buildings industry group because of differences in the organization of construction establishments among the three countries National level detail will provide specific information based on the type of structure (single family or multi-family) type of project (new structures or alterations and renovations of existing structures) or type of establishment (general contractor or operative builder) as appropriate in each country Consideration was given to each of these breakouts but national differences in the operating characteristics of establishments prevented three-country level comparability Establishments erecting nonresidential buildings are segregated into establishments erecting commercial and institutional buildings and establishments erecting industrial buildings and manufacturing plants This NAICS industry level distinction recognizes the differences inherent in erecting the various types of buildings

Establishments performing heavy construction are separated into four industry groups Utility System Construction Land Subdivision Highway Street and Bridge Construction and Other Heavy and Civil Engineering Construction Industries in these groups are engaged in large-scale projects and have related production characteristics Heavy and Civil Engineering Construction establishments can perform the work or subcontract the work to specialized establishments

Establishments in the Utility System Construction industry group construct lines and related structures for utility systems For example Water and Sewer Line and Related Structures Construction establishments that

construct pipelines distribution lines irrigation systems water treatment plants sewage treatment plants and pumping stations are grouped together This recognizes the fact that these buildings and structures are intershyrelated in a network environment and are not meaningfully separated based on the particular type of structure

Land Subdivision is included in Heavy and Civil Engineering Construction because of the similarity of activities involved with land subdivision and the other industry groups For example improved subdivisions often require installation of basic utilities roads and similar improvements that are also included elsewhere in the Heavy and Civil Engineering Construction subsector The production similarities for construction of highways streets and bridges justified the third industry group

The fourth residual industry group includes other heavy and civil engineering construction Examples include marine construction such as the building of ports and harbors and construction of dams for retaining water flood control or hydroelectric power generation purposes Heavy and Civil Engineering Construction includes general contractors design-builders operative builders and those specialty trade contractors whose activities generally only apply to the Heavy and Civil Engineering Construction subsector The activities performed by the specialty trade contractors in this subsector are rarely performed elsewhere

In Specialty Trade Contractors NAICS recognizes the highly specialized nature of a large number of small construction establishments These establishments concentrate on a particular construction activity or group of activities rather than accepting responsibility and risk for an entire project This difference separates these establishments from the first two subsectors Establishments in the Specialty Trade Contractors subsector usually act as subcontractors for the general contractors operative builders design-builders and other establishments that assume the risk for an entire construction project that takes place in the Construction of Buildings subsector In this capacity they can perform work as subcontractors or work directly for owners Specialty Trade Contractors also perform repair renovation and maintenance on various systems that fall within their specialty The skills and equipment used by specialty trade contractors in this subsector have more general application than skills and equipment used by the

specialty trade contractors included in Heavy and Civil Engineering Construction

Limitations and Constraints of the Classification

Climatic and geological differences within and among the three countries lead to different construction techniques and practices for various types of structures While wood is a significant input for residential housing in the Northern United States and Canada concrete and stone are more common in the Southwest United States and in Mexico Concrete and stone do not require siding and various other protections that are required with wood sheathing Geological instability results in different structural and foundation requirements Climate conditions dictate more insulation in northern areas while less insulation is appropriate in drier and warmer climates These conditions lead to differing size and importance of various industries throughout North America Each subsector varies across geographic lines based on the availability of raw materials and the environmental conditions that dictate construction practices

Relationship to ISIC

Most of the industries in the NAICS Construction Sector are contained in Division 45 Construction of the International Standard Industrial Classification of All Economic Activities (ISIC Revision 3) of the United Nations There are however some differences between the two systems Both NAICS and ISIC exclude preparation of oil and gas fields from Construction NAICS includes construction management activities within each of the industries in the Construction Sector while ISIC classifies construction management activities in Division 74 Other Business Activities NAICS includes land subdivision in Construction while ISIC classifies land subdivision in Division 70 Real Estate Activities

Some Changes to the National Industries

During the initial NAICS development effort the three countries agreed to the boundary and scope of the Construction sector at the two-digit level Each of the countries developed its own national structure at the three- four- five- and six-digit levels The changes discussed are identified as NAICS with a prefix of C for Canada U for the United States and M for Mexico for previous national detail and NAICS02 for the draft classification



For Canada CNAICS 23 was broken contains two industry groups 2361 not separately identified in UNAICS into two subsectors CNAICS 231 Prime Residential Buildings and 2632 This industry had existed in the US SIC Contracting and CNAICS 232 Trade Nonresidential Buildings The United States also created a new Contracting NAICS02 comprises three MNAICS 237 was made up of two national industry for residential subsectors 236 Construction of industry groups 2371 Construction of remodeling establishments In previous Buildings 237 Heavy and Civil Structures for Water Electricity classifications residential remodelers Engineering Construction and 238 Telecommunications Petroleum and were classified together with new Specialty Trade Contractors Gas and 2372 Construction of Urban residential construction

CNAICS 23141 Construction Infrastructure and Transportation Management will be distributed Systems NAICS02 is divided into four Achievement of Objectives

throughout all of the new NAICS02 industry groups 2371 Utility Systems The classification meets the objectives Construction industries Construction 2372 Land Subdivision for the North American Industry

Land Subdivision and Development 2373 Highway Street and Bridge Classification System (NAICS) It CNAICS 23111 will be moved from the Construction and 2379 Other Heavy includes industries that group subsector for Building Construction to and Civil Engineering Construction establishments with similar production NAICS02 23721 within the Heavy and As is the case for Canada MNAICS processes that is it applies the Civil Engineering Construction 23822 Supervision and Management of production-oriented economic concept subsector This move reflects the Construction projects will be distributed In the main the hierarchical structure of similarity of the activities performed in throughout the construction industries the classification also follows the the land subdivision industry and other in NAICS02 production concept industries in the Heavy and Civil For the United States the subsector The industries are highly specializedEngineering Construction subsector structures for UNAICS and NAICS02 are and they are economically significant

The construction of structures such very similar Most changes occurred Disruptions to time series are minimalas sewage treatment plants and water below the subsector level Of particular The classification achieves treatment plants will be moved from note UNAICS 23311 Land Subdivision comparability at most five-digit levelsCNAICS 23139 Other Engineering and Land Development moved from the for the three participating countries AllConstruction to NAICS02 2371 Utility subsector for construction of buildings three countries agree on the detailedSystem Construction and distributed to to NAICS02 237 Heavy and Civil definitions of the industries the proper industries within the Engineering Construction industry group UNAICS 23499 All Other Heavy Other objectives of the NAICS project

are not as relevant in this area of theFor Mexico the NAICS02 structure is Construction included water treatment classification as in others Thesevery similar to the MNAICS structure plants sewage treatment plants and objectives are the delineation of newdeveloped in 1997 While there were similar buildings that are now included and emerging industries servicevarious minor reaggregations below the in NAICS02 2371 Utility System industries and industries engaged inindustry group level the subsector Construction the production of new technologieslevels remained largely unchanged At the national level the United MNAICS 236 contained one industry States has reinstituted an industry for Section BmdashNAICS Structuremdash

group 2361 Buildings NAICS02 now operative residential builders that were Information

PROVISIONAL STRUCTURE PROPOSED FOR SECTOR 51 INFORMATION

51 511 5111 51111 51112 51113 51114 51119 5112 51121 512 5121 51211 51212 51213 51219 5122 51221 51222 51223 51224 51229 515 5151 51511 51512 5152 51521 516 5161 51611

Information Publishing Industries (except Internet)

Newspaper Periodical Book and Directory PublishersNewspaper PublishersPeriodical PublishersBook PublishersDirectory and Mailing List PublishersOther Publishers

Software PublishersSoftware Publishers

Motion Picture and Sound Recording IndustriesMotion Picture and Video Industries

Motion Picture and Video Production Motion Picture and Video Distribution Motion Picture and Video Exhibition Postproduction Services and Other Motion Picture and Video Industries

Sound Recording IndustriesRecord ProductionIntegrated Record ProductionDistributionMusic PublishersSound Recording StudiosOther Sound Recording Industries

Broadcasting (except Internet) Radio and Television Broadcasting

Radio BroadcastingTelevision BroadcastingCable and Other Subscription ProgrammingCable and Other Subscription Programming

Internet Publishing and BroadcastingInternet Publishing and Broadcasting

Internet Publishing and Broadcasting



PROVISIONAL STRUCTURE PROPOSED FOR SECTOR 51 INFORMATIONmdashContinued

517 5171 51711 5172 51721 5173 51731 5174 51741 5175 51751 5179 51791 518 5181 51811 5182 51821 519 5191 51911 51912 51919

Telecommunications Wired Telecommunications Carriers

Wired Telecommunications Carriers Wireless Telecommunications Carriers (except Satellite)

Wireless Telecommunications Carriers (except Satellite) Telecommunications Resellers

Telecommunications Resellers Satellite Telecommunications

Satellite Telecommunications Cable and Other Program Distribution

Cable and Other Program Distribution Other Telecommunications

Other Telecommunications Internet Service Providers Web Search Portals and Data Processing Services

Internet Service Providers and Web Search Portals Internet Service Providers and Web Search Portals

Data Processing Hosting and Related Services Data Processing Hosting and Related Services

Other Information Services Other Information Services

News Syndicates Libraries and Archives All Other Information Services

Draft Classification for Information

Representatives of the statistical agencies of Canada Mexico and the United States provisionally agree to a draft industrial classification for the Information sector The draft classification of the Information sector is divided into subsectors covering Publishing Industries (except Internet) Motion Picture and Sound Recording Industries Broadcasting (except Internet) Internet Publishing and Broadcasting Telecommunications Internet Service Providers Web Search Portals and Data Processing and Other Information Services These subsectors are further subdivided into 16 four-digit industry groups and 30 five-digit industries

The Information sector comprises establishments primarily engaged in (a) producing and distributing cultural information (b) providing the means to transmit or distribute these products as well as data or communications and (c) processing data

Many of the industries in the NAICS Information sector are engaged in either producing and manipulating products protected by copyright law or in distributing them (other than distribution by traditional wholesale and retail methods) Examples are traditional publishing industries software publishing industries and film and sound industries Also included are broadcasting industries telecommunication industries and information access providers and processors that process and distribute information and provide access to facilities for transmission of information Although many new

industries have been created for this sector most of the activities it contains have existed for some time A new feature of the revised Information Sector is the inclusion of new industries for activities that have recently appeared in the economy due to the rapid expansion of the Internet When NAICS was initially conceived Internet service providers web search portals and other forms of Internet distribution of content were in their infancy These activities are now separately identified in the classification

The following paragraphs provide a brief description of the individual components of this sector

The Publishing Industries (except Internet) subsector groups establishments engaged in the publishing of newspapers periodicals and books as well as directory mailing list and software publishing In general publishers issue copies of works for which they possess copyright for sale to the general public in one or more formats including traditional print form or in electronic copy such as diskette or CDndashROM Publishers may publish works originally created by others for which they have obtained the rights andor works that they have created inshyhouse

In NAICS publishingmdashthe reporting writing editing and other processes that are required to create an edition of a newspaper for examplemdashis treated as a major economic activity in its own right and classified in the Information sector whereas printing remains in the NAICS Manufacturing sector In part the NAICS classification reflects the fact that publishing increasingly takes place in establishments that are physically

separate from the associated printing establishments More crucially the NAICS classification of book and newspaper publishing is intended to portray their roles in a modern economy where they do not resemble manufacturing activities

Software publishing is included here because the activitymdashcreation of a copyrighted product and bringing it to marketmdashis equivalent to the creation process for other types of intellectual products Reproduction of pre-packaged software is treated in NAICS as a manufacturing activity and custom design of software to client specifications remains in Professional Scientific and Technical Services These distinctions arise because of the different ways that software is created reproduced and distributed The only change to this subsector for 2002 is the new title for Industry 51114 that has been renamed from Database and Directory Publishers to Directory and Mailing List Publishers This new title and an updated definition better describe the activities included in this industry

The Motion Picture and Sound Recording Industries subsector groups establishments involved in producing and distributing motion pictures and sound recordings (those involved exclusively in the wholesaling of sound recordings are classified in Wholesale Trade) While motion picture and sound recordings are also lsquolsquopublishedrsquorsquo the processes involved are sufficiently different from those traditional publishing industries to warrant placing them in the Motion Picture and Sound Recording Industries subsector



The production and distribution of these products involves a complex process and several distinct industries The Motion Picture and Video Industries industry group includes separate industries for Motion Picture and Video Production Motion Picture and Video Distribution Motion Picture and Video Exhibition Postproduction Services and Other Motion Picture and Video Industries The distribution industry includes establishments primarily engaged in acquiring the distribution rights (major input) for films and programs and charging such clients as movie theaters and broadcasters to show them those engaged in wholesaling videos to retail stores and rental outlets are classified in Wholesale Trade The Sound Recording Industries industry group contains classes for Record Production Companies Integrated Record ProductionDistribution Music Publishers Sound Recording Studios and Other Sound Recording Industries

Record production companies are primarily engaged in searching out identifying and contracting artists for whom they arrange and finance the production of master tapes for which they hold the reproduction rights Establishments in this industry do not own duplication facilities or have distribution capabilities so they commercialize these rights through leasinglicensing agreements with third parties Integrated record production companies (major record labels) integrate the production manufacturing andor distribution functions commercializing reproduction rights through these vertically integrated operations While establishments engaged in record production derive most of their revenues from leasing licensing the reproduction rights of master recordings and from mechanical royalties integrated record companies derive most of their revenues from the exploitation of their rights to distribute duplicate sound recordings No changes were made to this subsector for 2002

In NAICS 2002 Telecommunications and Broadcasting are split into separate subsectors This structural change acknowledges that the production and distribution of information or cultural content is significantly different from the creation of the infrastructure used in distribution

The new Broadcasting (except Internet) subsector NAICS 515 distinguishes between radio broadcasting television broadcasting and cable and other subscription programming These industry groups are based on differences in the methods of communication and in the nature of

services provided Broadcasting (except Internet) includes establishments that operate broadcasting studios and facilities for over the air cable or satellite delivery of audio and video programming such as music entertainment news talk and the like These establishments are often engaged in producing and purchasing programs and generating revenues from the sale of time to advertisers and from donations subsidies andor the sale of programs Cable and Other Subscription Programming establishments operate studios and facilities for the broadcasting of programs that are typically narrow cast in nature (limited format such as news sports education and youth-oriented programming) The services of these establishments are typically sold on a subscription or fee basis

NAICS 2002 recognizes for the first time the significant differences between traditional publishing and broadcasting and similar activities using the Internet in a new subsector for Internet Publishing and Broadcasting NAICS 516 The unique combination of text audio video and interactive features present in informational or cultural products on the Internet justifies the creation of the new subsector NAICS separates Internet Publishing and Broadcasting in order to identify and statistically characterize this area of rapid growth in the economies of the three North American partners in NAICS

The new Telecommunications subsector NAICS 517 is primarily engaged in operating maintaining and or providing access to facilities for transmitting voice data text sound and full motion picture video between network termination points In contrast to the Broadcasting subsector the Telecommunications subsector generally does not produce information or cultural content Telecommunications includes groupings and industries based on the technologies used As such there are separate industry groups for Wired Telecommunications Carriers Wireless Telecommunications Carriers (except Satellite) Telecommunications Resellers Satellite Telecommunications Cable and Other Program Distribution and Other Telecommunications All of these industry groups except Telecommunications Resellers operate transmission facilities that may be based on a single technology or a combination of technologies The Cable and Other Program Distribution industry group includes establishments that operate cable systems direct-to-home satellite systems or other similar systems

Another new subsector in NAICS groups establishments that provide Internet access Internet search services and data processing hosting and related services The Internet Service Providers Web Search Portals and Data Processing Services subsector NAICS 518 is subdivided into two industry groups The Internet Service Providers and Web Search Portals industry group includes establishments that provide access to the Internet or provide the means to search for information on the Internet The Data Processing Hosting and Related Services industry group includes establishments that process data for others Mainframe computer time-share facilities and web hosting establishments are included with Data Processing Hosting and Related Services

The final subsector Other Information Services NAICS 519 provides a classification for other information providers such as news syndicates as well as repositories of information products in the form of libraries and archives Libraries and archives provide access to information products stored in their physical facilities Museums however are classified in sector 71 Arts Entertainment and Recreation

Section CmdashNAICS United Statesmdash Wholesale Trade

Representatives of the statistical agencies of Canada Mexico and the United States conducted extensive discussions on the content and conceptual structuring of industries for wholesale trade of goods Due to the complexity of this dynamic sector and structural differences among the three countries no additional three-country comparability was obtained for wholesale trade Canada Mexico and the United States agree on the overall content of Wholesale Trade but will retain unique national industry detail within the sector However the United States has taken the insights gained from these discussions and incorporated them into a new national structure for Wholesale Trade

As in the 1997 NAICS United States there are two main types of wholesalers included in Wholesale Trade for the 2002 NAICS United States those that sell goods on their own account and those that arrange sales and purchases for others for a commission or fee

(1) Establishments that sell goods on their own account are known as wholesale merchants distributors jobbers drop shippers importexport merchants and sales branches These establishments typically take title to the goods being sold and maintain their own warehouse where they receive and



handle goods for their customers Goods are generally sold without transformation but may include integral functions such as sorting packaging labeling and other marketing services Throughout this notice these establishments are referred to as merchant wholesalers

(2) Establishments arranging for the purchase or sale of goods owned by others or the purchase of goods on a commission basis are known as agents and brokers commission merchants importexport agents and brokers auction companies and manufacturerrsquos representatives These establishments do not take title to the goods being sold Throughout this notice these establishments are referred to as business to business electronic markets and agents and brokers

Sector 42 Wholesale Trade would be divided into three subsectors in the United States subsector 423 Merchant Wholesalers Durable Goods subsector 424 Merchant Wholesalers Nondurable Goods and subsector 425 Wholesale Electronic Markets and Agents and Brokers Each of these subsectors is further divided into industry groups and industries to meet the detailed needs of the US statistical community

Subsector 423 Merchant Wholesalers Durable Goods is split into nine industry groups that follow the structure of NAICS 1997 These industry groups are further divided into thirty-seven national level industries The key difference between the content of subsector 421 Wholesale Trade Durable Goods in 1997 and subsector 423 Merchant Wholesalers Durable Goods is the exclusion of electronic markets and agents brokers and other intermediaries that do not take title to the goods being sold in subsector 423

Merchant wholesalers in NAICS 2002 are defined to include those establishments that buy or sell goods on their own account Included are wholesale merchants distributors jobbers drop shippers importexport merchants and manufacturerrsquos sales branches The key characteristic of wholesale establishments included in subsector 423 is ownership of the goods that are being sold

Subsector 424 Merchant Wholesalers Nondurable Goods mirrors the structure of NAICS 1997 subsector 422 Wholesale Trade Nondurable Goods Again the significant difference is the exclusion of electronic markets and agents and brokers and other intermediaries that do not take title to the goods being sold Subsector 424 is split into nine industry groups that are further divided into thirty-two national level industries classifying merchant wholesalers of nondurable goods

Subsector 425 Wholesale Electronic Markets and Agents and Brokers is a new subsector for NAICS United States 2002 Establishments in the Wholesale Electronic Markets and Agents and Brokers subsector arrange for the sale of goods owned by others on a fee or commission basis These establishments unlike those in subsectors 423 do not take title to the goods being sold They are acting on behalf of the buyers and sellers of goods

This subsector is being created to classify agents and brokers as well as electronic markets that facilitate wholesale trade Over the past two years the explosive growth of wholesale trade on the Internet has radically changed the role of agents and brokers and greatly expanded potential markets for suppliers While a wholesale trade business was previously constrained by

geography and the cost of initiating contact with potential customers the Internet has created inexpensive efficient national markets for suppliers The United States proposal for subsector 425 therefore creates a new national industry for these electronic markets in wholesale trade separate from the more traditional agents and brokers The outsourcing of storage transportation finance and other traditional wholesale trade functions is immensely eased with the advent of these new national electronic wholesale markets In order to gather data to better understand these changes in the context of all distributive trade industries they will be separately identified and categorized in NAICS United States 2002

NAICS United States 1997 included 69 separate national industries in Wholesale Trade NAICS United States 2002 includes 71 national industries in Wholesale Trade With the addition of only two national industries the restructuring of Wholesale Trade creates more homogeneous statistical data for users eases the burden of code assignment for sales representatives and wholesale trade brokers and separately identifies emerging trends for study and analysis Although additional international comparability was not obtained the changes to Sector 42 Wholesale Trade in the United States represent a major improvement in the statistics generated for wholesale trade using NAICS These changes also position the United States to measure and analyze more completely all distributive trade industries during future NAICS revisions

The entire proposed structure for Wholesale Trade is detailed in Part IV of this notice BILLING CODE 3110ndash01ndashP


























































Federal Register Vol 65 No 77 Thursday April 20 2000 Notices 21279







[FR Doc 00ndash9816 Filed 4ndash19ndash00 845 am] BILLING CODE 3110ndash01ndashC



OFFICE OF MANAGEMENT AND BUDGET

North American Industry Classification SystemmdashUpdate for 2002

AGENCY Office of Management and Budget Executive Office of the President ACTION Notice of solicitation of comments on the Economic Classification Policy Committeersquos recommendations for the 2002 revision of the North American Industry Classification System

SUMMARY Under Title 44 USC 3504(e) the Office of Management and Budget (OMB) seeks public comment on the advisability of adopting the proposed North American Industry Classification System (NAICS) updates for 2002 OMBrsquos Economic Classification Policy Committee (ECPC) recommends an update of the industry classification system to extend the harmonized three-country classification structure to construction and to recognize important changes in the retail trade and information sectors In addition as an interim measure in the United States the ECPC recommends restructuring of the Wholesale Trade sector to reflect differences in production functions and to capture more accurately the rapidly-growing business-to-business electronic markets developing in the United States

This notice (1) Summarizes the background for the proposed revisions to NAICS 1997 in Part I (2) contains a summary of public comments in Part II (3) details the proposed structure changes agreed upon by the three countries in Part III and (4) provides a comprehensive listing of proposed changes for national industries and their link to NAICS 1997 industries in Part IV

OMB published a notification of intention to complete portions of NAICS in a February 25 1999 Federal Register notice (64 FR 9416ndash9419) That notice solicited comments on the advisability of revising the NAICS 1997 structure for 2002 and solicited comments on the creation of new industries in the Construction and Wholesale Trade Sectors modifications to the national industries for department stores and nonstore retailers and other changes identified as necessary during the initial implementation of NAICS 1997 The deadline for submitting comments was April 26 1999

After considering all proposals from the public consulting with a large number of US data users and industry groups and undertaking extensive discussions with Statistics Canada and

Mexicorsquos Instituto Nacional deacute acute acute Estadıstica Geografıa e Informatica (INEGI) the ECPC INEGI and Statistics Canada developed a revised structure for both the Construction and Information sectors of NAICS that would apply to all three North American countries

For Wholesale Trade after extensive discussions with Statistics Canada and INEGI the representatives of the three countriesrsquo statistical agencies decided to delay three-country changes to this sector and instead plan for a complete restructuring of the distribution network industries (wholesale retail transportation and warehousing) in 2007 In the interim the ECPC recommends restructuring the Wholesale Trade sector to reflect differences in production functions between those wholesalers that take title to goods and those that do not and to capture more accurately the rapidly-growing business-to-business electronic markets developing in the United States The ECPC also developed proposed additional US industry detail in the Retail Trade sector for NAICS United States The ECPC recommends that NAICS United States 2002 incorporate these changes as shown in Parts III and IV

Following an extensive process of development and discussions by the ECPC with maximum possible public input OMB seeks comment on the advisability of revising NAICS to incorporate the changes published in this notice The modified NAICS would be employed in relevant data collections by all US statistical agencies beginning with the reference year 2002 Statistics Canada and INEGI are recommending acceptance of the proposed revision of the NAICS system for industry classification in the statistical programs of their national systems and are seeking comments in their respective countries Representatives of the three countries will hold further discussions to consider public comments that they receive DATES To ensure consideration of comments on the adoption and implementation of the NAICS revisions detailed in this notice comments must be in writing You should submit them as soon as possible but no later than June 19 2000 This proposed revision to NAICS would become effective in the US on January 1 2002 ADDRESSES You should send correspondence about the adoption and implementation of NAICS revisions as shown in this Federal Register notice to Katherine K Wallman Chief Statistician Office of Management and Budget 10201 New Executive Office

Building Washington DC 20503 telephone number (202) 395ndash3093 FAX number (202) 395ndash7245

You should address inquiries about the content of industries or requests for electronic copies of the tables to Carole Ambler Chair Economic Classification Policy Committee Bureau of the Census Room 2633ndash3 Washington DC 20233 telephone number (301) 457ndash 2668 FAX number (301) 457ndash1343

Electronic Availability and Comments This document is available on the Internet from the Census Bureau via WWW browser and E-mail To obtain this document via WWW browser connect to http wwwcensusgovnaics This WWW page also contains previous NAICS Federal Register notices and related documents

You may send comments via E-mail to pbuggombeopgov with subject NAICS02 OMB will include in the official record comments received via E-mail at this address with this subject by the date specified above FOR FURTHER INFORMATION CONTACT Paul Bugg 10201 New Executive Office Building Washington DC 20503 E-mail address pbuggombeopgov telephone number (202) 395ndash3093 FAX number (202) 395ndash7245 SUPPLEMENTARY INFORMATION

Part I Background of NAICS 1997

NAICS is a system for classifying establishments by type of economic activity Its purposes are (1) To facilitate the collection tabulation presentation and analysis of data relating to establishments and (2) to promote uniformity and comparability in the presentation and analysis of statistical data describing the economy Federal statistical agencies use NAICS to collect or publish data by industry It also is used widely by State agencies trade associations private businesses and other organizations

INEGI of Mexico Statistics Canada and the United States Office of Management and Budget (OMB) through its Economic Classification Policy Committee (ECPC) collaborated on NAICS to make the industrial statistics produced in the three countries comparable NAICS is the first industry classification system developed in accordance with a single principle of aggregation the principle that producing units that use similar production processes should be grouped together in the classification NAICS also reflects in a much more explicit way the enormous changes in technology and in the growth and diversification of services that have





























































A General Outline































51 511 5111 51111 51112 51113 51114 51119 5112 51121 512 5121 51211 51212 51213 51219 5122 51221 51222 51223 51224 51229 515 5151 51511 51512 5152 51521 516 5161 51611














517 5171 51711 5172 51721 5173 51731 5174 51741 5175 51751 5179 51791 518 5181 51811 5182 51821 519 5191 51911 51912 51919
















































































































































































A General Outline































51 511 5111 51111 51112 51113 51114 51119 5112 51121 512 5121 51211 51212 51213 51219 5122 51221 51222 51223 51224 51229 515 5151 51511 51512 5152 51521 516 5161 51611














517 5171 51711 5172 51721 5173 51731 5174 51741 5175 51751 5179 51791 518 5181 51811 5182 51821 519 5191 51911 51912 51919















































































































































51 511 5111 51111 51112 51113 51114 51119 5112 51121 512 5121 51211 51212 51213 51219 5122 51221 51222 51223 51224 51229 515 5151 51511 51512 5152 51521 516 5161 51611














517 5171 51711 5172 51721 5173 51731 5174 51741 5175 51751 5179 51791 518 5181 51811 5182 51821 519 5191 51911 51912 51919























































































































517 5171 51711 5172 51721 5173 51731 5174 51741 5175 51751 5179 51791 518 5181 51811 5182 51821 519 5191 51911 51912 51919




















































































































office of management and budget...presentation, and analysis of data relating to establishments, and...

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